UPFRONT estimated insolvency costs will need to be provided by practitioners, business minister Jo Swinson (pictured) has announced today.
The new rules will require a summary of estimated costs, the work to be undertaken and an estimate of the expected time to work on a case where an hourly rate is proposed.
The estimate will create a ‘cap’ on costs that can only be increased with agreement between the IPs and those owed money.
“Increased transparency is a sensible and practical way to strengthen the hands of those owed money in an insolvency and will give insolvency practitioners the opportunity to demonstrate how their services provide value for money,” said Swinson.
“Insolvency practitioners do important and specialist work realising the assets of failed companies for distribution to suppliers and others owed money. Initial fee estimates, which can only be changed by agreement, will strengthen the position of those owed money to ensure that fees are fair and reasonable.”
Giles Frampton, president of R3, said the trade body was “very pleased” with what he described as “practical proposals” for updating the fee-setting process.
“An up-front estimate should work for both creditors and the insolvency profession, and will help improve trust and transparency in our insolvency regime. The profession first supported an up-front estimate system in 2011 and we are pleased to see it set to become reality.”
Philip King, chief executive of the Chartered Institute of Credit Management (CICM), said: “The CICM has been vocal in wanting to see up-front estimates for work undertaken so the element of surprise is removed further down the road in the insolvency procedure.
“The introduction of new rules is therefore to be strongly welcomed as are any well-considered actions that help to bring greater confidence to creditors and transparency in the fees that are charged.”